Priced out of the market: How banning agency fees can support homeless people

22/09/15

Imagine popping to the shops for some milk on a Sunday morning. Only one thing is different: there’s a 50p charge on your receipt to cover the cost of the shop’s fridge cabinet. Not really fair, is it? Surely that should be covered in the price of the pint? This is how tenants in the private rented sector have been treated for years.

At The Wallich we support homeless people and those who are at risk of becoming homeless. This includes projects supporting those already in the private rented sector (PRS) and helping those without a home into privately rented dwellings. Our Private Sector Access Team, in partnership with Swansea Council and using Welsh Government funds, provides grants and loans to help homeless people with the rising cost of accessing the private rented sector. Parts of these grants and loans are used to cover letting agency fees.

The PRS has doubled in size over the past twenty years – currently making up 14% of all homes in Wales1 – and will soon grow to be larger than the social housing sector. 66% of PRS tenancies are arranged through a letting agent2.

Letting agency fees are regularly charged before the start of a tenancy to cover costs such as referencing, credit checks and administration. These are business costs which we believe should be covered by the business, not the customer. Fees now cost on average £355 per tenancy, with 1-in-5 renters paying over £5003. This, combined with a deposit equal to a month’s rent alongside a month’s rent in advance, regularly pushes the cost of moving rented homes up to £1500 for a family4.

Research by Shelter found that 27% of those using a letting agency between 2010 & 2013 had to borrow to pay fees, with 17% cutting down on heating or food to cover the costs. Some of these tenants accessed funds through high-cost pay day lenders5. The high cost of moving and lack of available cheap credit cause many households to become trapped in homes that are overcrowded or not fit for habitation simply because they cannot afford to move, exacerbating problems that can lead to homelessness.

Those opposed to a ban on letting agency fees claim that rents would have to rise to absorb the lost revenue for agents. Similarly, it is predicted that landlords will see increased fees. This was not the case when Scotland banned letting agency fees in 1984 and began enforcement in 2012. Subsequent research has shown that since the enforcement began:

> Landlords in Scotland were no more likely to have increased rents than landlords elsewhere in the UK6

> Less than 1-in-5 letting agencies had increased fees to landlords6

> 70 of landlords using agents in Scotland had not noticed any increase in fees

> Only one landlord out of 120 surveyed had passed on any increase in agency fees to their tenants in full6

Only 10% of the British public disagree with banning letting agency fees, with 63% in support of a ban7. At The Wallich we believe that ending letting agency fees is right for Wales and will work with partners across the charity and government sectors to make it a reality.

3YouGov survey for Shelter. Sample size was 4646 adults in England and Wales living in the private rented sector. The figures have been weighted and are representative of the English and Welsh private rented sector (aged 18+).